BNSF chairman says progress being made on N.D. delays

BISMARCK – A top BNSF executive said Wednesday the railroad is catching up with a backlog of fertilizer shipments and orders to move North Dakota farm products to market, but wet weather has hampered progress.

In a sit-down interview with Forum News Service at the Williston Basin Petroleum Conference in Bismarck, BNSF Executive Chairman Matt Rose said the railroad still has 6,800 past-due railcars for shipment of agricultural products in North Dakota, down from a peak of 8,200 in March.

“We’re going to see those start to come down meaningfully in June” as the railroad moves more shuttles into single-car service, he said.

BNSF has exceeded its commitment to deliver 52 trainloads of fertilizer to North Dakota over a six-week period starting April 12. Fifty-four loads have been picked up and 49 have been delivered, with the rest expected to arrive soon, he said.

“So we’re days away, not weeks or months,” he said.

North Dakota grain growers and dealers have voiced concerns in recent months that BNSF and Canadian Pacific Railway may be giving priority to cars carrying Bakken light crude oil, which both companies have denied doing. The state Public Service Commission has even discussed taking legal action on behalf of farmers and grain elevators.

Growth in crude-by-rail is an easy answer for BNSF’s recent service challenges, but “it’s not entirely correct,” Rose said. Shipments of agricultural products and building materials also have increased significantly, he said.

The railroad industry grew by 800,000 units, or carloads, from 2012 to 2013, and BNSF handled about half of that business, Rose said. Shipments to and from North Dakota accounted for at least 20 percent of the total growth, he said.

Speaking to the conference Wednesday, Rose joked that BNSF has found “the next great line of business for the railroad: delivering pickup trucks to Fargo, N.D.” The railroad is bringing a total of 240 trucks per day to its facilities in Fargo and St. Paul, a 543 percent increase since 2011, he said.

In North Dakota, BNSF was handling about 75 shuttle trains for ag products and 110 to 115 shuttles for oil through the first nine months of last year, but in October after harvest the agriculture sector wanted 100 or so trains and the oil industry wanted 130, Rose said.

“It’s all the volume that just came, and we’ve chosen at our company not to de-market any business and not to choose winners or losers but quite frankly to build the capacity,” he said in the interview.

The railroad is investing a record $5 billion into its system in 2014, which follows a record $4 billion investment last year, he said. This year’s plan calls for adding 500 new locomotives, 5,000 new railcars, 5,000 new employees – including more than 400 in North Dakota – and laying hundreds of miles of new track.

“Quite frankly, the weather has given us fits being able to get the road bed stabilized enough to be able to lay the track,” he said.

While some additional capacity will come online this summer, the bulk of it will be in place by October, “and it’s going to be extremely helpful,” Rose said.

Meanwhile, BNSF continues to focus on improving the safety of shipping crude by rail, he told the conference.

Ron Ness, president of the North Dakota Petroleum Council, asked Rose to respond to a report the industry group released Tuesday that found Bakken crude is similar to other light, sweet crudes and isn’t unique to other hazardous materials hauled in older DOT-111 tanker cars – the same model involved in the Dec. 30 fiery derailment near Casselton, N.D., and the derailment and explosion of train cars carrying Bakken crude that killed 47 people last July in Lac-Megantic, Quebec.

Rose said he “never believed that Bakken was different” from other light crudes. But if BNSF is to continue to haul it, Bakken crude must be stripped of its natural gas liquids and volatile gasses or be shipped in a stronger tank car like a modified CPC 1232 or BNSF’s proposed next-generation tank car, said Rose, who predicted in March that construction could begin early next year on the first batch of 5,000 next-generation cars.

“Shipping it right now … with the gasses in, creating the volatility we’ve seen in these derailments, we need a different car,” he said in the interview.

There currently is no regulatory standard for tank cars, he noted. The U.S. Department of Transportation has submitted proposed rules to the Office of Management and Budget for review, but they’re not expected to be released publicly for several months.

In the meantime, BNSF has taken specific actions to reduce the risk of moving crude by rail, Rose said, including restricting maximum train speeds, shortening distances between track defect detectors and providing response training.

“Without focus on all the elements of safety, the social license to haul crude by rail will disappear, to say nothing of the regulatory agencies’ response,” he told the conference.